Do Business Well

Poor Accounting Controls

Accounts receivable. The A/R ledger has to be reconciled with the sales journal and the cash receipts journal. If not, it /Ispossible to lose an invoice, have the customer never pay, and never realize it. It’s also a good idea to add up the totals of your numerical invoice file and compare the results with your sales journal.

Accounts payable. Make certain that your A/P ledger agrees with your purchase journal and your disbursement journal. If you don’t do this exercise, you could double-pay an invoice, or lose an invoice and not pay it. The next time you need product from the supplier you will be past due on the account. This may result in your having to pay the old bill (which you weren’t expecting) and pay for the next order COD because you lost your credit standing with this supplier.

Cash register tape. Every day you need to be certain that your cash balances with your tape. This is a perfect opportunity for an employee to steal from you if he knows you aren’t balancing the cash drawer daily.

In addition to all the profit-and-loss reasons for properly accounting for this information, there is also the IRS, not to mention the state taxing authorities. If they do the balancing of these items for you, they’ll always do so to their own advantage.

Internal Theft

Employee theft and embezzlement are common company killers. When they hit, the results are usually fast and irreversible. Fortunately, there are steps you can take to protect your business.

You as the owner should sign every check. When signing the check, scrutinize the invoice or voucher. If you have any question about its propriety, question it now, not later.

There may be times when you’ll be out of town and unavailable to sign checks. Try to anticipate the needs of the company while you’re gone and fill out and sign as many checks as possible.

You’ll generally need to leave a few checks signed in blank. Unless it is your wife, partner, trusted relative, or associate of many years who’ll fill in the payee and dollar figure, you may want to put limits at the top of each check: “Not to exceed $500.00,” for example.

Theft of inventory is another big problem. If you sell a product that has a value “on the streets,” you are very likely to become a target of internal theft. It’s a well-known fact that retailers suffer far more loss out the back door due to employees’ light fingers than they do out the front door via shoplifting.

The most important step in preventing all types of losses due to employee dishonesty is to make certain your employees understand that you won’t tolerate stealing. They should understand that you will fire and prosecute anyone caught stealing.

You may also be the victim of another type of employee theft. This would be the one-time major heist, either by an outsider or an employee who has inside information and access. Examples might include a situation where an individual responsible for closing up at night purposely fails to lock a door or turn on the alarm. They return later with a truck and clean you out.

About the only thing you can do to protect yourself against this kind of loss is the use of insurance. Be careful here, because your standard theft policy may not cover some kinds of insider-created losses. You may want to carry special coverage such as employee bonds.

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